The Isle of Man has launched a new funds proposition designed to attract further funds business to the island. It expands the suite of fund categories to include two new products – a Specialist Fund and a Qualified Fund. The initiative also includes a major new focus on hedge funds designed to secure business for the incorporation, domiciliation and the establishment of fund management operations in the Isle of Man. The aim is to sustain the strong growth in the Island’s fund sector, which now exceeds $50 billion from $7 billion in 2003. Funds under administration in the island are forecast to double to $100 billion over the next three years. Treasury Minister Allan Bell will be taking three new legislative orders to Tynwald, the island’s parliament, in October. Due to come into force on 1 November, they will provide for the new Specialist (SF) and Qualified (QF) funds, as well as transitional and retention arrangements for existing Experienced Investor Funds. The SF, which offers maximum flexibility on strategy and asset allocation, is the fund category for distribution to institutional and high net worth investors. With a minimum initial subscription of $100,000, there is no requirement for any regulatory pre-approvals so the SF can be launched quickly. The new initiative follows the publication in February of a review, chaired by former global head of HSBC’s Alternative Fund Services Division Paul Smith, which was commissioned amid a slowdown in the pace of growth in fund-related business on the island. The review noted that while the island's funds industry grew by 35 per cent in 2006, this was largely as a result of rising markets and the increase in overseas and closed ended funds. In addition, the total number of funds in the Isle of Man, excluding exempt funds, only rose to 330 from 265 in 2005. Of the 65 funds added in 2006, 40 were established and domiciled overseas, predominantly in the Caribbean, and just 25 were established and domiciled in the Isle of Man. By comparison, during the same period, some 1,232 funds were established and domiciled in Cayman and 142 in Jersey. The Smith Report announced the Isle of Man’s intention to position itself as the preferred location both for the incorporation, domiciliation and management of institutional funds in the global alternative funds industry. The island will also seek to position itself as a cost effective and zero tax location for fund managers to locate their middle and back office operations. Brian Donegan of Isle of Man Finance said: “We anticipate that our new funds initiatives, when coupled with the Isle of Man’s existing taxation advantages, will position us as the jurisdiction of choice for fund management and fund administration operations.”